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Apr 5, 2017

Former Sears CEO tells HBC to forget acquisitions and 'drill down' on strategy

Hudson's Bay shows failed strategies and weakness across the board: Former Sears Canada CEO

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Hudson’s Bay Co. (HBC.TO) needs to stop chasing mergers and “drill down” into its day-to-day business in the wake of its “terrible” quarterly results, the former CEO of Sears Canada (SCC.TO) tells BNN.

“[HBC] needs to stop playing this acquisitive game and drill down into each of its operating strategies,” says Mark Cohen, former CEO of Sears Canada.

The retailer has made numerous headlines in recent weeks amid speculation the company was in talks to buy Macy’s department store as well as troubled U.S. retailer Neiman Marcus Group. Any acquisition for HBC would be “tragic…a highly problematic example of bad judgement,” said Cohen.

HBC should forget about acquisitions and focus on its revamping its underlying operating strategies that “aren’t working,” he said.

On Tuesday, HBC reported a net loss of $152 million, or 83 cents per share, compared with net earnings of $370 million, or $1.88 in the same period a year ago. The retailer reported weaker holiday sales and took a $116 million charge related to its off-price business which includes Saks Off Fifth and online deals retailer Gilt. Cohen called the results “terrible” and said they “tell a tale of a very tough” year ahead.

Cohen,who is now Director of Retail Studies at Columbia University’s Graduate School of Business, says there’s been a “consistent lack of growth across all of HBC’s businesses.”   He concedes HBC has had a “notable” increase in online sales, but adds they’ve come at the expense of brick and mortar store sales.

HBC would be better off without an international expansion of Saks, said Cohen.  “Saks has never been particularly strong in the United States, outside of New York City and a handful of other locations.” Cohen said.  “Saks is not working in Canada.  They talked about opening Saks in Germany.  To insinuate that that brand can operate powerfully and profitably across a national border is an enormous leap of faith.”

HBC, and other high-end U.S. retailers, would also suffer if the U.S. imposes a border adjustment tax on imported goods, says Cohen. “Virtually everything that Saks and Neiman Marcus sell is imported at already strikingly high prices. Their prices are going to go up another 10, 15, 20 per cent” if the tax is put in place.